Bajaj Auto in focus: Automotive manufacturing company Bajaj Auto Limited reported robust financial performance in the third quarter of fiscal year 2024 (Q3FY24), with revenue, earnings before interest, tax, depreciation and amortisation (EBITDA), and profit after tax (PAT) growing by 30 per cent, 20 per cent, and 37 per cent year-on-year (YoY), respectively.

The Pune-based company also witnessed notable growth in volumes, with a 22 per cent year-on-year increase and average selling prices (ASPs) rising 6.5 per cent annually to Rs 100.9 per unit. Despite a 50 basis points (bps) annual contraction in gross margin, EBITDA margin expanded 100 bps annually to 20.1 per cent.

Management commentary

The company’s management highlighted that domestic two-wheeler retail sales grew by 11 per cent annually in the December quarter, and the industry is expected to see an 8-10 per cent growth in the coming months.

The festive demand was robust, and the company's market share in Triumph motorcycles reached 20 per cent in certain regions. The management plans to expand its footprint to cover 50 per cent of the market in over 100 cities.

In the exports segment, while the macro environment remains uncertain due to geopolitical issues, the devaluation of emerging market currencies has eased. Exports, currently at 70 per cent of peak FY22 volumes, grew approximately 2 per cent sequentially during the quarter. However, challenges persist in Africa and South Asia.

In the electric vehicle (EV) space, Bajaj Auto is expanding its presence, aiming to be in 50 cities by the fourth quarter and 400 cities before the 2024 season. The company plans to increase the capacity for its Triumph motorcycles from the current 10,000 units per month to 20,000 units, with a target of reaching approximately 30,000 units in first half of financial year 2025 (H1FY25)

Outlook

While anticipating a recovery in both domestic and export volumes in FY25, Bajaj Auto is positioned to benefit from market share gains, driven by the premiumisation trend, export opportunities, and a crucial position in the scooter market through EVs, according to brokerage firm Motilal Oswal.

However, the company's India profit pool, particularly in premium motorcycles and three-wheelers, faces potential disruption from electrification, analysts noted.

Motilal Oswal has reiterated ‘Neutral’ rating with a target price of Rs 6,775.

The market capitalisation of the company is approximately Rs 2.10 lakh crore, according to BSE.

As of 11:03 am, shares of Bajaj Auto were trading 2.70 per cent higher at Rs 7,406.15 per share.